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Thursday, January 15, 2015

Vroom Make Car Sales Go; Rest of Economy? No

December retail sales figures came in and they are kinda interesting..

All in all, it rose to a respectable 4% increase which isn't bad, though 58% of that came from auto sales and visiting bars & restaurants...

So December was a good month to buy a car, celebrate with some beers then drink & drive,,

We kid..  Hah Hah.. Hee Hee..

Now retail stores themselves.. the Wally-Worlds, Targee',  (K)rap-Marts and (Not so) Best Buys ..  they really struggled and actually suffered through a collectively poor December at -0.9%

But should it really have been a surprise?
We spent a lot of time looking at all the ads and bargain hunting this Christmas season and can honestly say that pretty much every sale these box and online stores offered was Terrible

If something is offered at 33% or 50% off, that in itself does not make that item a good December sale.    The key is whether or not that item is marked down at different times of the year as well..

When a sale occurs often, it loses its exceptionalism and generally speaking, smart customers at least don't feel any rush or instinctual pressure to buy
We wrote on this a month ago and say it again.. The very Bestest and probably Truest sale of the entire holiday season was the Target gift cards which were 10% off (up to $300) and only sold on Black Friday morning until 11AM

Target never did it before and who knows if they will ever do it again, but it meant for $270, you got a $300 card to use indefinitely with no hidden fees on anything in the store, even sale items and everything is as if an additional 10% off is applied.

The Target RedCard only gives 5% off purchases.
And really everything else sold by everyone was just blehh..   The stores absolutely were not going to discount anything by a penny more than they had to and fortunately people were smart enough not to buy for the sake of buying..

Black Friday itself may have seen increased shopping traffic and sales but when you factor in 'Return Monday', the sales weren't that amazing..

So yes people bought cars and lots of them..

Gas prices dropping certainly helped and what also helped push sales along is that its an item most only have to put 5 to 15% down and then get to finance the rest (delay full repayment w interest) for 6 to 8 years...
In the last 12 months, auto sales have increased by $86 billion and auto loans by even more - $89 billion.  

Seems everyone either thinks everything will magically keep getting better in the future or are so desperate for a car (such as leases ending) that they can't wait any longer for things to improve.

No wonder the automobile derivatives market has soared in the last couple years...

Use to be prior to the last crash, mortgages were sold to people with less than pristine credit with lazy background checks with the goal of lenders packaging them up to sell to others who in turn sold to others, and everyone supposedly would make a killing..
People forgot post-crash how hard and lengthy a process it is to evict someone from their domicile (sometimes the process can take over a year) and thus that dramatically slowed down the turnover speed...

Automobiles are much easier to profit from..

Most if not all vehicles have a chip placed in the ignition where you are prevented from starting up and running your vehicle if you are delinquent in your payment.

This allows the GPS to notify the creditor where to pick up the car if the delay in making a payment is too great
And if the person wants or needs their car to start, they have to call a number, give a payment over the phone and magically the car will start again..

See how much simpler and cleaner it is to deal with delinquency and repossession of cars vs homes?

As for the growth in bars & restaurants in December, its the economic top 20% driving this total..

Let's put it this way.. If the restaurant industry was so strong, why do we and most others see our email boxes flooded with 15% off coupons for Olive Garden & Outback Steakhouse, Applebee's and other similar restaurants..
No one gives discounts if they don't have to.

Speaking of discounts, there is one food place who's discounts are more meaningless and valueless in terms of being "special" than any other and that's Papa John's

Most people know they have promotional tie-ins with the metropolitan cities they're located in where let's say you live in Boston and the Celtics or Bruins win, you type a code when ordering and get 50% off, right?

OK.. In Philly, the Sixers are a horrible, unwatchable team and PapaJohn's was noticing that they were hardly selling any 50% off pizzas with that discount because the Sixers rarely won, especially the first month in the season..
So the promotion was changed solely for that market..  Pathetically, if the Sixers scored 90pts win or lose, people could get the 50% off...

When a store is desperate to give out 50% off coupons, you can see how much one is truly overcharged when getting Papa John's at regular price.

So in summary, things are getting slowly better in dribs and drabs for some people and inndustries, but the collective economy?

Nope